Module 4

MBA@GIT http://www.mba.git.edu.
© Prof. Prasad Kulkarni, Gogte Institute of Technology, Belgaum. pvkulkarni@git.edu.
Services Marketing
Module 4
Customer defined service standards and
service design and positioning
According to VTU syllabus, Service Marketing
12 MBAMM314

Objectives
After studying this Module you will be able to
1. Understand hard and soft standards of
services.
2. Process developing service standards.
3. Assess challenges of service development
4. Know new service development process.
5. Learn service blueprinting, service recovery
and service positioning concepts.

Customer Response Following Service
Failure
Service Failure
Do NothingTake Action
Stay with ProviderSwitch Providers
Complain to
Provider
Complain to
Family & Friends
Complain to
Third Party
Stay with ProviderSwitch Providers

Service Recovery Strategies
Service
Recovery
Strategies

Causes Behind Service
Switching
Service
Switching
Behavior
• High Price
• Price Increases
• Unfair Pricing
• Deceptive Pricing
Pricing
• Location/Hours
• Wait for Appointment
• Wait for Service
Inconvenience
• Service Mistakes
• Billing Errors
• Service Catastrophe
Core Service Failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable
Service Encounter Failures
• Negative Response
• No Response
• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Ethical Problems
• Customer Moved
• Provider Closed
Involuntary Switching

Service Guarantees
guarantee = an assurance of the fulfillment of a
condition (Webster’s Dictionary)
for products, guarantee often done in the form of a
warranty
services are often not guaranteed
–cannot return the service
–service experience is intangible
–(so what do you guarantee?)

Characteristics of an Effective Service Guarantee
Unconditional
 The guarantee should make its promise unconditionally -
no strings attached.
Meaningful
 It should guarantee elements of the service that are
important to the customer.
 The payout should cover fully the customer's
dissatisfaction.
Easy to Understand and Communicate
 For customers - they need to understand what to expect.
 For employees - they need to understand what to do.
Easy to Invoke and Collect
 There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

Why a Good Guarantee Works
forces company to focus on customers
sets clear standards
generates feedback
forces company to understand why it failed
builds “marketing muscle”

Service Guarantees
Does everyone need a guarantee?
Reasons companies do NOT offer guarantees:
– guarantee would be at odds with company’s
image
– too many uncontrollable external variables
– fears of cheating by customers
– costs of the guarantee are too high

Service Guarantees
service guarantees work for companies who are
already customer-focused
effective guarantees can be BIG deals - they put the
company at risk in the eyes of the customer
customers should be involved in the design of service
guarantees
the guarantee should be so stunning that it comes as
a surprise -- a WOW!! factor
“it’s the icing on the cake, not the cake”

Risks of Relying on Words Alone to Describe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation

NewServiceDevelopmentProcess
Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
 Business Strategy Development or Review
 New Service Strategy Development
 Idea Generation
 Concept Development and Evaluation
 Business Analysis
 Service Development and Testing
 Postintroduction Evaluation
 Commercialization
 Market Testing
Screen ideas against new service strategy
Test concept with customers and employees
Test for profitability and feasibility
Conduct service prototype test
Test service and other marketing-mix elements
Front End
Planning
Implementation

New Service Strategy Matrix for
Identifying Growth Opportunities
Markets
Offerings
Existing
Services
New
Services
Current Customers New Customers
SHARE BUILDING
DIVERSIFICATION
MARKET
DEVELOPMENT
SERVICE
DEVELOPMENT

Service Mapping/Blueprinting
A tool for simultaneously depicting the service
process, the points of customer contact, and the
evidence of service from the customer’s point of
view.
Service
Mapping
Process
Points of Contact
Evidence

Service Blueprint Components
CUSTOMER ACTIONS
line of interaction
“ONSTAGE” CONTACT EMPLOYEE ACTIONS
line of visibility
“BACKSTAGE” CONTACT EMPLOYEE ACTIONS
line of internal interaction
SUPPORT PROCESSES

Driver
Picks
Up Pkg.
Dispatch
Driver
Airport
Receives
& Loads
Sort
Packages
Load on
Airplane
Fly to
Destination
Unload
&
Sort
Load
On
Truck
Express Mail Delivery Service
SUPPORT
PROCESS
CONTACTPERSON
(BackStage)(OnStage)
CUSTOME
R
PHYSICAL
EVIDENCE
Customer
Calls
Customer
Gives
Package
Truck
Packaging
Forms
Hand-held
Computer
Uniform
Receive
Package
Truck
Packaging
Forms
Hand-held
Computer
Uniform
Deliver
Package
Customer
Service
Order
Fly to
Sort
Center

Overnight Hotel StaySUPPORTPROCESS
CONTACTPERSON
(BackStage)(OnStage)
CUSTOMER
Hotel
Exterior
Parking
Cart for
Bags
Desk
Registration
Papers
Lobby
Key
Elevators
Hallways
Room
Cart for
Bags
Room
Amenities
Bath
Menu Delivery
Tray
Food
Appearance
Food
Bill
Desk
Lobby
Hotel
Exterior
Parking
Arrive
at
Hotel
Give Bags
to
Bellperson
Check in
Go to
Room
Receive
Bags
Sleep
Shower
Call
Room
Service
Receive
Food
Eat
Check out
and
Leave
Greet and
Take
Bags
Process
Registration
Deliver
Bags
Deliver
Food
Process
Check Out
Take Bags
to Room
Take
Food
Order
Registration
System
Prepare
Food
Registration
System
PHYSICAL
EVIDENCE

Building a Service Blueprint
Step 1
Identify the
process to
be blue-
printed.
Step 2
Identify the
customer or
customer
segment.
Step 3
Map the
process
from the
customer’s
point of
view.
Step 4
Map
contact
employee
actions,
onstage and
back-stage.
Step 5
Link customer
and contact
person
activities to
needed
support
functions.
Step 6
Add
evidence of
service at
each
customer
action step.

Application of Service Blueprints
New Service Development
• concept development
• market testing
Supporting a “Zero Defects” Culture
• managing reliability
• identifying empowerment issues
Service Recovery Strategies
• identifying service problems
• conducting root cause analysis
• modifying processes

Blueprints Can Be Used By:
Service Marketers
– creating realistic customer
expectations
• service system design
• promotion
Operations Management
– rendering the service as
promised
• managing fail points
• training systems
• quality control
Human Resources
– empowering the human
element
• job descriptions
• selection criteria
• appraisal systems
System Technology
– providing necessary tools:
• system specifications
• personal preference databases

Exercise for Creating Customer-Defined Service
Standards
Form a group of four people
Use your school’s undergraduate or graduate
program, or an approved alternative
Complete the customer-driven service standards
importance chart
Establish standards for the most important and
lowest-performed behaviors and actions
Be prepared to present your findings to the class

Getting to Actionable Steps
Satisfaction Value
Relationship
Solution Provider
Reliability Empathy
Assurance Tangibles
Responsiveness Price
Delivers on Time
Returns Calls Quickly
Knows My Industry
Delivers by Weds 11/4
Returns Calls in 2 Hrs
Knows Strengths of
My Competitors
Requirements:
Abstract
Concrete
Dig
Deeper
Dig
Deeper
Dig
Deeper
Diagnosticity:
Low
High
General Concepts
Dimensions
Behaviors
and Actions
Attributes

Process for Setting Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence
2. Translate Customer Expectations Into Behaviors/Actions
4. Set Hard or Soft Standards
5. Develop Feedback
Mechanisms
7. Track Measures Against Standards
Measure by
Audits or
Operating Data
Hard Soft
Measure by
Transaction-
Based Surveys
3. Select Behaviors/Actions for Standards
6. Establish Measures and Target Levels
8. Update Target Levels and Measures

Aligning Company Processes with Customer
Expectations
Customer Expectations
Customer
Process
Blueprint
Company
Process
Blueprint
Company Sequential Processes
A B C D E F G H
40 Days
New Card
Mailed
Lost Card
Reported
Report Lost Card Receive New
Card
48 Hours

Metro cash and carry customer service

Module 4

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